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Denny’s Corporation Reports Results For Second Quarter 2021
المصدر: Nasdaq GlobeNewswire / 03 أغسطس 2021 15:05:03 America/Chicago
SPARTANBURG, S.C., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its second quarter ended June 30, 2021 and provided a business update on the Company’s operations.
John Miller, Chief Executive Officer, stated, “We are simply delighted to welcome guests back now that all of our operating domestic dining rooms are open while still providing them with the convenience of our off-premise options. With the easing of restrictions, the rollout of our two new virtual brands, The Burger Den and The Meltdown, along with the perseverance of our entire organization, both June and July domestic system-wide same-store sales** surpassed 2019 pre-pandemic levels. We are encouraged by the potential for additional sales growth as we overcome staffing challenges and return to 24/7 operations across our system."
Second Quarter 2021 Highlights
- Total operating revenue increased 164.3% to $106.2 million, primarily due to the COVID-19 recovery.
- Domestic system-wide same-store sales** decreased 1.2% compared to the equivalent fiscal period in 2019, including a 1.5% decrease at domestic franchised restaurants and a 1.9% increase at company restaurants.
- Domestic system-wide same-store sales** increased 117.0% compared to the equivalent fiscal period in 2020.
- Opened three franchised restaurants, including one international location.
- Operating income (loss) was $18.3 million compared to ($13.5) million in the prior year quarter.
- Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales.
- Net loss was $0.8 million, or $0.01 per diluted share.
- Adjusted Net Income* was $11.6 million, or $0.18 per share.
- Adjusted EBITDA* was $25.3 million compared to ($5.1) million in the prior year quarter.
- Cash provided by (used in) operating, investing, and financing activities was $33.1 million, ($1.2) million, and ($35.6) million, respectively.
- Adjusted Free Cash Flow* was $17.8 million compared to ($11.5) million in the prior year quarter.
- Provided guidance for the fiscal third quarter 2021.
Current Trends
Domestic system-wide same-store sales** for the second quarter ended June 30, 2021, continued to trend toward pre-pandemic levels. Fiscal periods June and July surpassed 2019 sales levels at both company and domestic franchise restaurants. With all operating dining rooms open, off-premise sales, inclusive of virtual brands, have remained strong at approximately 24% of total sales compared to 12% pre-pandemic.
Additionally, during the second quarter the Company substantially completed the rollout of its first virtual brand, The Burger Den, to over 1,100 domestic locations and began a phased rollout of its second virtual brand, The Meltdown, to approximately half of the domestic system. Transactions for these two virtual brands are highly incremental and leverage labor during underutilized dayparts.
In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results for 2021 compared to the equivalent fiscal periods in 2019:
Domestic System-Wide Same-Store Sales** Compared to 2019 Fiscal Periods and Domestic Average Units for 2021 Fiscal Periods
Domestic System-Wide Same-Store Sales** Fiscal Year 2021 Jan Feb Mar Apr May Jun Jul 1 System (31%) (25%) (9%) (2%) (3%) 1% 3% 24/7 Units (20%) (16%) 2% 11% 11% 14% 15% Limited Hour Units (38%) (32%) (16%) (11%) (12%) (8%) (7%) - July results are preliminary.
Domestic Average Units Fiscal Year 2021 Jan Feb Mar Apr May Jun Jul 1 System 1,504 1,501 1,501 1,499 1,498 1,497 1,495 24/7 Units 519 532 569 566 561 566 576 Limited Hour Units 939 928 912 920 926 920 909 Temporary Closures 46 41 20 13 11 11 10 - July results are preliminary.
Second Quarter Results
Denny’s total operating revenue increased 164.3% to $106.2 million compared to $40.2 million in the prior year quarter. Franchise and license revenue was $58.6 million compared to $25.0 million in the prior year quarter. Company restaurant sales were $47.6 million compared to $15.1 million in the prior year quarter. These changes were primarily due to reduced dine-in restrictions and fewer temporary closures related to the COVID-19 pandemic in the current period as compared to the prior year period.
Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, compared to $9.8 million, or 39.1%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants, partially offset by fewer equivalent units.
Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales, compared to ($4.5) million, or (29.6%), in the prior year quarter. This change in margin was primarily due to the improvement in sales performance at company restaurants in addition to lower payroll and benefits costs due to staffing challenges. Additionally, the Company recorded approximately $0.6M in favorable reserve adjustments and tax credits related to the CARES Act.
Total general and administrative expenses were $17.5 million, compared to $13.2 million in the prior year quarter. This change was primarily due to increases in both performance-based incentive compensation and share-based compensation expense in addition to temporary cost reductions during the prior year quarter. These increases were partially offset by market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter as well as approximately $0.5 million in tax credits related to the CARES Act.
Denny’s ended the quarter with $194.9 million of total debt outstanding, including $180.0 million of borrowings under its credit facility. Subsequent to the end of the second quarter, the Company paid down an additional $5 million on its revolving credit facility, bringing the current outstanding balance to $175.0 million.
The benefit from income taxes was $1.2 million, compared to $5.1 million in the prior year quarter, reflecting an effective tax rate of 59.3%. Approximately $1.5 million in cash taxes were paid during the quarter.
Net loss was $0.8 million, or $0.01 per diluted share, compared to net loss of $23.0 million, or $0.41 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.18 compared to Adjusted Net Loss* per share of $0.25 in the prior year quarter.
Adjusted Free Cash Flow* and Capital Allocation
Denny’s generated $17.8 million of Adjusted Free Cash Flow* after investing $1.5 million in cash capital expenditures, including maintenance capital.
Business Outlook
The following expectations for the fiscal third quarter ending September 29, 2021 reflect management's expectations that the current economic environment will not change materially:
- Domestic system-wide same-store sales** growth between 2% and 4% compared to the equivalent fiscal period in 2019.
- Total general and administrative expenses between $17 million and $18 million, including approximately $3.5 million related to share-based compensation.
- Adjusted EBITDA* between $22 million and $24 million.
* Please refer to the Reconciliation of Net Income (Loss) and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable GAAP estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimates are not provided.
** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.
Conference Call and Webcast Information
Denny’s will provide further commentary on the results for the second quarter ended June 30, 2021 on its quarterly investor conference call today, Tuesday, August 3, 2021 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Denny’s website at investor.dennys.com.
About Denny’s
Denny's Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of June 30, 2021, Denny’s had 1,645 franchised, licensed, and company restaurants around the world including 149 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and the United Kingdom. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.
Cautionary Language Regarding Forward-Looking Statements
The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: the rapidly evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health, social and political conditions that impact consumer confidence and spending with respect to social unrest and the COVID-19 pandemic; competitive pressures from within the restaurant industry; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 30, 2020 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).
DENNY’S CORPORATION Condensed Consolidated Balance Sheets (Unaudited) (In thousands) 6/30/21 12/30/20 Assets Current assets Cash and cash equivalents $ 10,882 $ 3,892 Investments 2,069 2,272 Receivables, net 20,407 21,349 Inventories 1,280 1,181 Assets held for sale 1,621 1,125 Prepaid and other current assets 12,168 18,847 Total current assets 48,427 48,666 Property, net 82,490 86,154 Financing lease right-of-use assets, net 9,437 9,830 Operating lease right-of-use assets, net 135,229 139,534 Goodwill 36,884 36,884 Intangible assets, net 50,892 51,559 Deferred financing costs, net 1,727 2,414 Deferred income taxes, net 19,854 23,210 Other noncurrent assets 33,407 32,698 Total assets $ 418,347 $ 430,949 Liabilities Current liabilities Current finance lease liabilities $ 1,637 $ 1,839 Current operating lease liabilities 16,348 16,856 Accounts payable 14,376 12,021 Other current liabilities 55,251 46,462 Total current liabilities 87,612 77,178 Long-term liabilities Long-term debt 180,000 210,000 Noncurrent finance lease liabilities 13,265 13,530 Noncurrent operating lease liabilities 132,959 137,534 Liability for insurance claims, less current portion 9,602 10,309 Other noncurrent liabilities 94,332 112,844 Total long-term liabilities 430,158 484,217 Total liabilities 517,770 561,395 Shareholders' deficit Common stock 642 640 Paid-in capital 129,176 123,833 Deficit (172,161 ) (194,514 ) Accumulated other comprehensive loss, net (57,080 ) (60,405 ) Total shareholders' deficit (99,423 ) (130,446 ) Total liabilities and shareholders' deficit $ 418,347 $ 430,949 Debt Balances (In thousands) 6/30/21 12/30/20 Credit facility revolver due 2022 $ 180,000 $ 210,000 Finance lease liabilities 14,902 15,369 Total debt $ 194,902 $ 225,369 DENNY’S CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Quarter Ended (In thousands, except per share amounts) 6/30/21 6/24/20 Revenue: Company restaurant sales $ 47,572 $ 15,128 Franchise and license revenue 58,593 25,033 Total operating revenue 106,165 40,161 Costs of company restaurant sales, excluding depreciation and amortization 37,813 19,606 Costs of franchise and license revenue, excluding depreciation and amortization 28,735 15,244 General and administrative expenses 17,548 13,153 Depreciation and amortization 3,897 4,058 Operating (gains), losses and other charges, net (113 ) 1,627 Total operating costs and expenses, net 87,880 53,688 Operating income (loss) 18,285 (13,527 ) Interest expense, net 4,066 4,947 Other nonoperating expense, net 16,251 9,565 Loss before income taxes (2,032 ) (28,039 ) Benefit from income taxes (1,204 ) (5,074 ) Net loss $ (828 ) $ (22,965 ) Basic net loss per share $ (0.01 ) $ (0.41 ) Diluted net loss per share $ (0.01 ) $ (0.41 ) Basic weighted average shares outstanding 65,294 55,686 Diluted weighted average shares outstanding 65,294 55,686 Comprehensive loss $ (578 ) $ (18,550 ) General and Administrative Expenses Quarter Ended (In thousands) 6/30/21 6/24/20 Corporate administrative expenses $ 10,345 $ 9,701 Share-based compensation 3,388 1,511 Incentive compensation 3,032 1 Deferred compensation valuation adjustments 783 1,940 Total general and administrative expenses $ 17,548 $ 13,153 DENNY’S CORPORATION Condensed Consolidated Statements of Operations (Unaudited) Two Quarters Ended (In thousands, except per share amounts) 6/30/21 6/24/20 Revenue: Company restaurant sales $ 81,141 $ 57,419 Franchise and license revenue 105,600 79,437 Total operating revenue 186,741 136,856 Costs of company restaurant sales, excluding depreciation and amortization 67,977 55,724 Costs of franchise and license revenue, excluding depreciation and amortization 52,493 44,414 General and administrative expenses 34,495 20,895 Depreciation and amortization 7,558 8,204 Operating (gains), losses and other charges, net 419 3,100 Total operating costs and expenses, net 162,942 132,337 Operating income 23,799 4,519 Interest expense, net 8,343 8,898 Other nonoperating expense (income), net (13,797 ) 12,328 Income (loss) before income taxes 29,253 (16,707 ) Provision for (benefit from) income taxes 6,900 (2,755 ) Net income (loss) $ 22,353 $ (13,952 ) Basic net income (loss) per share $ 0.34 $ (0.25 ) Diluted net income (loss) per share $ 0.34 $ (0.25 ) Basic weighted average shares outstanding 65,273 55,993 Diluted weighted average shares outstanding 65,789 55,993 Comprehensive income (loss) $ 25,678 $ (42,209 ) General and Administrative Expenses Two Quarters Ended (In thousands) 6/30/21 6/24/20 Corporate administrative expenses $ 21,217 $ 21,482 Share-based compensation 6,860 (26 ) Incentive compensation 5,118 15 Deferred compensation valuation adjustments 1,300 (576 ) Total general and administrative expenses $ 34,495 $ 20,895 DENNY’S CORPORATION Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures (Unaudited) The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss), net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.
Quarter Ended Two Quarters Ended (In thousands) 6/30/21 6/24/20 6/30/21 6/24/20 Net income (loss) $ (828 ) $ (22,965 ) $ 22,353 $ (13,952 ) Provision for (benefit from) income taxes (1,204 ) (5,074 ) 6,900 (2,755 ) Operating (gains), losses and other charges, net (113 ) 1,627 419 3,100 Other nonoperating expense (income), net 16,251 9,565 (13,797 ) 12,328 Share-based compensation expense (benefit) 3,388 1,511 6,860 (26 ) Deferred compensation plan valuation adjustments 783 1,940 1,300 (576 ) Interest expense, net 4,066 4,947 8,343 8,898 Depreciation and amortization 3,897 4,058 7,558 8,204 Cash payments for restructuring charges and exit costs (869 ) (690 ) (1,274 ) (1,374 ) Cash payments for share-based compensation (69 ) — (1,565 ) (3,211 ) Adjusted EBITDA $ 25,302 $ (5,081 ) $ 37,097 $ 10,636 DENNY’S CORPORATION Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures (Unaudited) Quarter Ended Two Quarters Ended (In thousands) 6/30/21 6/24/20 6/30/21 6/24/20 Net cash provided by (used in) operating activities $ 33,136 $ (9,859 ) $ 43,371 $ (7,958 ) Capital expenditures (1,525 ) (1,658 ) (3,108 ) (4,476 ) Cash payments for restructuring charges and exit costs (869 ) (690 ) (1,274 ) (1,374 ) Cash payments for share-based compensation (69 ) — (1,565 ) (3,211 ) Deferred compensation plan valuation adjustments 783 1,940 1,300 (576 ) Other nonoperating expense (income), net 16,251 9,565 (13,797 ) 12,328 Gains (losses) on investments 5 (25 ) (3 ) 91 Gains (losses) on termination of leases 106 (25 ) 72 (53 ) Amortization of deferred financing costs (344 ) (188 ) (688 ) (340 ) Gains (losses) on interest rate swap derivatives, net (17,227 ) (11,466 ) 12,506 (11,466 ) Interest expense, net 4,066 4,947 8,343 8,898 Cash interest expense, net (1) (4,455 ) (4,717 ) (9,041 ) (8,437 ) Deferred income tax (expense) benefit 1,888 1,128 (2,211 ) 3,705 Provision for (benefit from) income taxes (1,204 ) (5,074 ) 6,900 (2,755 ) Income taxes paid, net (1,521 ) (53 ) (1,942 ) (277 ) Changes in operating assets and liabilities Receivables (404 ) 6,473 (757 ) (9,342 ) Inventories 111 (179 ) 98 (175 ) Other current assets (1,383 ) 6,704 (6,677 ) 2,593 Other noncurrent assets 1,116 1,472 1,317 (106 ) Operating lease assets and liabilities 217 (1,787 ) 821 (1,769 ) Accounts payable (3,800 ) (6,928 ) (5,620 ) 537 Accrued payroll (3,696 ) (1,264 ) (1,992 ) 11,519 Accrued taxes (814 ) (259 ) (434 ) 712 Other accrued liabilities (3,454 ) 214 (4,649 ) 6,551 Other noncurrent liabilities 887 220 2,036 2,827 Adjusted Free Cash Flow $ 17,801 $ (11,509 ) $ 23,006 $ (2,554 ) (1 ) Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively. DENNY’S CORPORATION Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures (Unaudited) Quarter Ended Two Quarters Ended (In thousands) 6/30/21 6/24/20 6/30/21 6/24/20 Adjusted EBITDA $ 25,302 $ (5,081 ) $ 37,097 $ 10,636 Cash interest expense, net (1) (4,455 ) (4,717 ) (9,041 ) (8,437 ) Cash paid for income taxes, net (1,521 ) (53 ) (1,942 ) (277 ) Cash paid for capital expenditures (1,525 ) (1,658 ) (3,108 ) (4,476 ) Adjusted Free Cash Flow $ 17,801 $ (11,509 ) $ 23,006 $ (2,554 ) Quarter Ended Two Quarters Ended (In thousands, except per share amounts) 6/30/21 6/24/20 6/30/21 6/24/20 Net income (loss) $ (828 ) $ (22,965 ) $ 22,353 $ (13,952 ) (Gains) losses on interest rate swap derivatives, net 17,227 11,466 (12,506 ) 11,466 (Gains) losses on sales of assets and other, net (65 ) 12 (1,007 ) (1,058 ) Impairment charges — — — 2,181 Tax effect (2) (4,756 ) (2,168 ) 3,189 (2,396 ) Adjusted Net Income (Loss) $ 11,578 $ (13,655 ) $ 12,029 $ (3,759 ) Adjusted diluted weighted average shares outstanding 65,829 55,686 65,789 55,993 Diluted Net Income (Loss) Per Share $ (0.01 ) $ (0.41 ) $ 0.34 $ (0.25 ) Adjustments Per Share $ 0.19 $ 0.16 $ (0.16 ) $ 0.18 Adjusted Net Income (Loss) Per Share $ 0.18 $ (0.25 ) $ 0.18 $ (0.07 ) (1 ) Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively. (2 ) Tax adjustments for the quarter and year-to-date periods ended June 30, 2021 reflect an effective tax rate of 27.7% and 23.6%, respectively. Tax adjustments for the reclassification of losses related to derivatives are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended June 24, 2020. Tax adjustments for all other items for the quarter and year-to-date periods ended June 24, 2020 are calculated using an effective rate of 5.4% and 8.8%, respectively. DENNY’S CORPORATION Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures (Unaudited) The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. The Company uses Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and these three non-GAAP measures are used to evaluate operating effectiveness.
The Company defines Restaurant-level Operating Margin as operating income (loss) excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.
Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. The Company defines Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue.
These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items, and are not indicative of the overall results for the Company.
Quarter Ended Two Quarters Ended (In thousands) 6/30/21 6/24/20 6/30/21 6/24/20 Operating income (loss) $ 18,285 $ (13,527 ) $ 23,799 $ 4,519 General and administrative expenses 17,548 13,153 34,495 20,895 Depreciation and amortization 3,897 4,058 7,558 8,204 Operating (gains), losses and other charges, net (113 ) 1,627 419 3,100 Restaurant-level Operating Margin $ 39,617 $ 5,311 $ 66,271 $ 36,718 Restaurant-level Operating Margin consists of: Company Restaurant Operating Margin (1) $ 9,759 $ (4,478 ) $ 13,164 $ 1,695 Franchise Operating Margin (2) 29,858 9,789 53,107 35,023 Restaurant-level Operating Margin $ 39,617 $ 5,311 $ 66,271 $ 36,718 (1 ) Company Restaurant Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue; less franchise and license revenue. (2 ) Franchise Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales; less company restaurant sales. DENNY’S CORPORATION Operating Margins (Unaudited) Quarter Ended (In thousands) 6/30/21 6/24/20 Company restaurant operations: (1) Company restaurant sales $ 47,572 100.0 % $ 15,128 100.0 % Costs of company restaurant sales: Product costs 11,447 24.1 % 4,305 28.5 % Payroll and benefits 16,970 35.7 % 8,039 53.1 % Occupancy 2,844 6.0 % 2,728 18.0 % Other operating costs: Utilities 1,390 2.9 % 1,098 7.3 % Repairs and maintenance 635 1.3 % 428 2.8 % Marketing 1,365 2.9 % 607 4.0 % Other direct costs 3,162 6.6 % 2,401 15.9 % Total costs of company restaurant sales $ 37,813 79.5 % $ 19,606 129.6 % Company restaurant operating margin (non-GAAP) (2) $ 9,759 20.5 % $ (4,478 ) (29.6 )% Franchise operations: (3) Franchise and license revenue: Royalties $ 27,117 46.3 % $ 6,719 26.8 % Advertising revenue 18,600 31.7 % 7,232 28.9 % Initial and other fees 2,066 3.5 % 1,346 5.4 % Occupancy revenue 10,810 18.4 % 9,736 38.9 % Total franchise and license revenue $ 58,593 100.0 % $ 25,033 100.0 % Costs of franchise and license revenue: Advertising costs $ 18,600 31.7 % $ 7,232 28.9 % Occupancy costs 6,879 11.7 % 5,829 23.3 % Other direct costs 3,256 5.6 % 2,183 8.7 % Total costs of franchise and license revenue $ 28,735 49.0 % $ 15,244 60.9 % Franchise operating margin (non-GAAP) (2) $ 29,858 51.0 % $ 9,789 39.1 % Total operating revenue (4) $ 106,165 100.0 % $ 40,161 100.0 % Total costs of operating revenue (4) 66,548 62.7 % 34,850 86.8 % Restaurant-level operating margin (non-GAAP) (4)(2) $ 39,617 37.3 % $ 5,311 13.2 % Other operating expenses: (4)(2) General and administrative expenses $ 17,548 16.5 % $ 13,153 32.8 % Depreciation and amortization 3,897 3.7 % 4,058 10.1 % Operating (gains), losses and other charges, net (113 ) (0.1 )% 1,627 4.1 % Total other operating expenses $ 21,332 20.1 % $ 18,838 46.9 % Operating income (loss) (4) $ 18,285 17.2 % $ (13,527 ) (33.7 )% (1 ) As a percentage of company restaurant sales. (2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles. (3 ) As a percentage of franchise and license revenue. (4 ) As a percentage of total operating revenue. DENNY’S CORPORATION Operating Margins (Unaudited) Two Quarters Ended (In thousands) 6/30/21 6/24/20 Company restaurant operations: (1) Company restaurant sales $ 81,141 100.0 % $ 57,419 100.0 % Costs of company restaurant sales: Product costs 19,719 24.3 % 14,435 25.1 % Payroll and benefits 29,935 36.9 % 25,145 43.8 % Occupancy 5,694 7.0 % 5,891 10.3 % Other operating costs: Utilities 2,615 3.2 % 2,534 4.4 % Repairs and maintenance 1,168 1.4 % 1,217 2.1 % Marketing 2,332 2.9 % 1,726 3.0 % Other direct costs 6,514 8.0 % 4,776 8.3 % Total costs of company restaurant sales $ 67,977 83.8 % $ 55,724 97.0 % Company restaurant operating margin (non-GAAP) (2) $ 13,164 16.2 % $ 1,695 3.0 % Franchise operations: (3) Franchise and license revenue: Royalties $ 47,961 45.4 % $ 30,566 38.5 % Advertising revenue 32,711 31.0 % 24,758 31.2 % Initial and other fees 3,904 3.7 % 3,043 3.8 % Occupancy revenue 21,024 19.9 % 21,070 26.5 % Total franchise and license revenue $ 105,600 100.0 % $ 79,437 100.0 % Costs of franchise and license revenue: Advertising costs $ 32,711 31.0 % $ 24,758 31.2 % Occupancy costs 13,418 12.7 % 13,238 16.7 % Other direct costs 6,364 6.0 % 6,418 8.1 % Total costs of franchise and license revenue $ 52,493 49.7 % $ 44,414 55.9 % Franchise operating margin (non-GAAP) (2) $ 53,107 50.3 % $ 35,023 44.1 % Total operating revenue (4) $ 186,741 100.0 % $ 136,856 100.0 % Total costs of operating revenue (4) 120,470 64.5 % 100,138 73.2 % Restaurant-level operating margin (non-GAAP) (4)(2) $ 66,271 35.5 % $ 36,718 26.8 % Other operating expenses: (4)(2) General and administrative expenses $ 34,495 18.5 % $ 20,895 15.3 % Depreciation and amortization 7,558 4.0 % 8,204 6.0 % Operating (gains), losses and other charges, net 419 0.2 % 3,100 2.3 % Total other operating expenses $ 42,472 22.7 % $ 32,199 23.5 % Operating income (4) $ 23,799 12.7 % $ 4,519 3.3 % (1 ) As a percentage of company restaurant sales. (2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles. (3 ) As a percentage of franchise and license revenue. (4 ) As a percentage of total operating revenue. DENNY’S CORPORATION Statistical Data (Unaudited) Changes in Same-Store Sales (1) Quarter Ended Two Quarters Ended (Increase (decrease) vs. 2019) 6/30/21 6/30/21 Company Restaurants 1.9 % (10.6 )% Domestic Franchised Restaurants (1.5 )% (10.2 )% Domestic System-wide Restaurants (1.2 )% (10.2 )% Changes in Same-Store Sales (1) Quarter Ended Two Quarters Ended (Increase (decrease) vs. prior year) 6/30/21 6/24/20 6/30/21 6/24/20 Company Restaurants 172.1 % (64.9 )% 46.8 % (35.9 )% Domestic Franchised Restaurants 113.2 % (56.1 )% 30.8 % (28.4 )% Domestic System-wide Restaurants 117.0 % (56.9 )% 31.9 % (29.1 )% Average Unit Sales Quarter Ended Two Quarters Ended (In thousands) 6/30/21 6/24/20 6/30/21 6/24/20 Company Restaurants $ 732 $ 246 $ 1,257 $ 890 Franchised Restaurants $ 416 $ 183 $ 742 $ 589 Franchised Restaurant Unit Activity Company & Licensed Total Ending Units March 31, 2021 65 1,584 1,649 Units Opened — 3 3 Units Closed — (7 ) (7 ) Net Change — (4 ) (4 ) Ending Units June 30, 2021 65 1,580 1,645 Equivalent Units Second Quarter 2021 65 1,582 1,647 Second Quarter 2020 62 1,622 1,684 Net Change 3 (40 ) (37 ) Franchised Restaurant Unit Activity Company & Licensed Total Ending Units December 30, 2020 65 1,585 1,650 Units Opened — 6 6 Units Closed — (11 ) (11 ) Net Change — (5 ) (5 ) Ending Units June 30, 2021 65 1,580 1,645 Equivalent Units Year-to-Date 2021 65 1,583 1,648 Year-to-Date 2020 64 1,627 1,691 Net Change 1 (44 ) (43 ) (1 ) Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP. Investor Contact: Curt Nichols 877-784-7167 Media Contact: Hadas Streit, Allison+Partners 646-428-0629